2015 (5) TMI 278

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....ssessee, the petitioner has been served with the reasons recorded for reopening the assessment for AY 2009- 2010 by communication dated 28.4.2014. The petitioner submitted objections to the reassessment proceedings vide objection dated 3.12.2014. While communication dated 5.1.2015, the Assessing Officer has disposed of the said objection and has overruled the said objection. Hence, the petitioner has preferred the present Special Civil Application under Article 226 of the Constitution of India for the aforesaid relief. 3. Shri BS Soparkar, learned advocate appearing on behalf of the petitioner has vehemently submitted that the impugned notice of reopening the assessment for AY 2009-2010 issued under section 148 of the Act is absolutely illegal, wholly without jurisdiction and invalid. 3.1 It is further submitted that as such, the reasons recorded for reopening the assessment is nothing but a change of opinion by the Assessing Officer, which is not permissible. 3.2 It is vehemently submitted by Shri Soparkar, learned advocate appearing on behalf of the petitioner that at the time of original assessment proceedings, the petitioner attended the case from time to time and forw....

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....ever, it did not deduct TDS under section 195 on the plea that the said companies were registered outside India and did not have permanent establishment in India and services rendered and utilized were outside India. It is submitted that the Assessing Officer also similarly noticed that payment of Rs. 25.29 lac to one Bhupendra Singh was not subjected to TDS on the plea that he is non resident in India and his services rendered were utilized outside India. It is submitted that the Assessing Officer found that as per the amended provision of section 9 vide Finance Act, 2010, which came into force w.e.f. 1.6.1976, income of a non resident shall be deemed to accrue or arise in India under clause (v) or clause (vi) or clause (vii) of sub section (1) shall be included in the total income of the non resident whether or not; (1) the non resident has a residence or place of business connection in India; or (2) the non resident has rendered services in India. It is submitted that therefore, the Assessing Officer found that the amount paid to the aforesaid 5 companies as well as Bhupendra Singh had accrued in India and therefore, on the aforesaid amount, TDS under section 195 of the Act was ....

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....geable under the head "Salaries") shall, at the time of credit of such income to the account of the payee or at the time of payment, thereof, deduct income-tax thereon at the rates in force. Failure to deduct tax at source make the expenditure disallowable u/s 40(a)(i). Besides this, mandatory penalty equal to amount of tax is also leviable u/s 271C. Further, as per amended provision of section 9 vide Finance Act, 2010, w.r.e.f. 1-6- 1976 explanation was amended read as "For the removal of doubts, it is hereby declared that for the purposes of this section, income of a non-resident shall be deemed to accrue or arise in India under clause (v) or clause (vi) or clause (vii) of sub-section (1) and, shall be included in the total income of the nonresident. whether or not, - (i) The non~resident has a residence or place of business connection in India; or (ii) The non-resident has rendered services in India". As such by amendment with retrospective effect of 1 June 1976, any payment in the form of interest. royalty and technical services to any non resident (i.e an NRI or foreign company) is income accrued in India and liable to TDS u/s 195 of the Act.' The assessee company of ....

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....d 5 foreign companies as well as Bhupendra Singh including other expenses also. The case was selected for scrutiny and the notice under Sections 142(1) and 143(2) were issued and served upon the petitioner from time to time. It is required to be noted that vide letters dated 18.1.2011, 15.7.2011 and 14.10.2011, the petitioner was served with the questionnaires by the Assessing Officer and specific queries with respect to the issue involved i.e. with respect to the payment made to the foreign parties as well as known particulars with respect to TDS deducted and if the TDS is not deducted, the reasons for not deducting the TDS with supporting documents including the certificate of the concerned chartered accountant. 5.3 That during the course of assessment proceedings, the Assessing Officer asked the following question/particulars from the assessee. "2. Expenditure in foreign currency (Point No.8 of Schedule - 21) It is observed from audited balance sheet that during the year under consideration, the assessee Company has incurred the following foreign expenditure- IMAGE NO. 2 In this regard, the assessee company is required to submit the following details:- i. Name,....

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....ng Officer during the original assessment proceedings referred herein above and only thereafter, the Assessing Officer finalized the assessment and did not make any addition by disallowing the expenses under section 40(a)(i) of the Act on the ground that there was a failure on the part of the assessee not to deduct the TDS on the amount paid to the aforesaid 5 companies and Bhupendra Singh, it can safely be said that it is nothing, but a change of opinion by the Assessing Officer. It is required to be noted that when the Assessing Officer passed original assessment order, by the time, section 9 already amended by Finance Act, 2010 w.e.f. 1.6.1976 was very much there. 5.5 Identical question came to be considered by the Division Bench of this Court in the case of classic Network Limited (supra) and the Division Bench of this Court quashed and set aside the reopening of the assessment, which was within the period of four years on the ground that reopening was nothing but change of opinion on the part of the Assessing Officer. In the case before the Division Bench also, the provision, which was consequently relied upon by the Assessing Officer while reopening the assessment was very....